04/19/1999 09:04 AM Senate FIN

                                                                                                                                
SENATE BILL NO. 129                                                                                                             
"An Act relating to the Alaska marine highway system                                                                            
vessel, M/V Malaspina; and providing for an effective                                                                           
date."                                                                                                                          
                                                                                                                                
                                                                                                                                
This was the first hearing for this bill, which was                                                                             
sponsored by the Senate Finance Committee.                                                                                      
                                                                                                                                
Co-Chair John Torgerson said he reviewed the legislation                                                                        
with Captain Doll of the Marine Highway System over the                                                                         
weekend and had concerns with the capital improvements fund                                                                     
provisions. He detailed the language deletions he felt                                                                          
should be made. He wanted a correction made to ensure that                                                                      
capital improvements were made through the regular capital                                                                      
budget process.                                                                                                                 
                                                                                                                                
                                                                                                                                
Tape: SFC - 99 #96, Side B    9:51 AM                                                                                           
                                                                                                                                
                                                                                                                                
Senator Sean Parnell asked for an explanation of the                                                                            
purpose of the bill.  Co-Chair John Torgerson said it was                                                                       
to set up a separate accounting for the M/V Malaspina. It                                                                       
would direct the department to maintain the gross revenues                                                                      
generated by that ferry separately. An underlying reason                                                                        
was the intent of the Legislature to continue to subsidize                                                                      
the M/V Malaspina in its dayboat operation. That was clear                                                                      
in the original legislation that established the route and                                                                      
this bill would lay the groundwork.  He noted language that                                                                     
allowed the Legislature to continue to appropriate funds if                                                                     
it desired.                                                                                                                     
                                                                                                                                
There was front section language in the FY00 Operating                                                                          
Budget bill that would relate to this.                                                                                          
                                                                                                                                
Senator Sean Parnell moved to amend page 1 line 12 and page                                                                     
2 line 7 to delete the language relating to capital                                                                             
improvements. The amendment would direct the bill drafters                                                                      
to reword the language in an appropriate manner. There was                                                                      
no objection and it was ordered.                                                                                                
                                                                                                                                
ROBERT DOLL, General Manager, Ferry Operations, Department                                                                      
of Transportation and Public Facilities, testified to the                                                                       
bill. He spoke of the intensive discussion with the sponsor                                                                     
to clarify the language.                                                                                                        
                                                                                                                                
The bill would segregate the revenue generated by the M/V                                                                       
Malaspina and direct the department to use those funds to                                                                       
operate the vessel. The department estimated expenditures                                                                       
of $3,900,000 for the upcoming summer season. Revenues were                                                                     
estimated at $3,057,000. The $33,000 difference was close                                                                       
enough that the department could manage the ship and ensure                                                                     
its operation.                                                                                                                  
                                                                                                                                
The amendment continued the current practice of allowing                                                                        
the department to make annual maintenance repairs on the                                                                        
vessel using capital funds.  He explained that the extent                                                                       
of repairs was never known until the ship was dry-docked                                                                        
and examined.  That annual process had always been                                                                              
addressed using a single capital appropriation.                                                                                 
                                                                                                                                
Senator Loren Leman noted that under this the ferry would                                                                       
not be operating in the black. Robert Doll agreed that the                                                                      
$33,000 difference would be a separate allocation. This was                                                                     
due in part to the expected higher maintenance costs this                                                                       
year. He speculated that the route would generate surplus                                                                       
revenue once it reached its full schedule of operation.                                                                         
                                                                                                                                
Senator Loren Leman wanted to know if it would become                                                                           
closest ferry in the system to breaking even. Robert Doll                                                                       
said the M/V Columbia was the first, the M/V Malaspina was                                                                      
second. Both ferries operated in high revenue segments.                                                                         
                                                                                                                                
Senator Gary Wilken asked how Captain Doll felt about the                                                                       
sponsor statement. He read, "we are sending a strong                                                                            
message that the Legislature does not intend to subsidize                                                                       
the operation of dayboats."  Robert Doll commented that it                                                                      
was an ambitious statement that the department would be                                                                         
working towards in the long term. He discussed the                                                                              
different routes and the expected revenue they could                                                                            
generate in relation to the cost of operation.                                                                                  
                                                                                                                                
Senator Sean Parnell offered a motion to moved SB 129 as                                                                        
amended from committee. Senator Al Adams objected. He felt                                                                      
this legislation would set poor precedent in the                                                                                
establishment of separate accounting systems for certain                                                                        
services.  He felt this was micro-management. He stressed                                                                       
that the Marine Highway System was Southeast Alaska's                                                                           
highway. He wondered if the intent was to someday micro-                                                                        
manage other highways in rural areas of the state.                                                                              
                                                                                                                                
Co-Chair John Torgerson noted the M/V Malaspina was                                                                             
supposed to have been surplused with the launch of the M/V                                                                      
Kennicott.  This expanded the service.  It was his intent                                                                       
for the marine transportation system to break even. The                                                                         
system of separate accounting would help ensure that.                                                                           
                                                                                                                                
Senator Loren Leman wanted to know about overhead costs                                                                         
such as administration and the reservation system and if                                                                        
those costs would be broken out of the program. Co-Chair                                                                        
John Torgerson said that if those costs were charged to the                                                                     
M/V Malaspina, the department could not afford to operate                                                                       
the ferry. Therefore, those costs would not be accounted                                                                        
for under the bill.                                                                                                             
                                                                                                                                
The bill was reported from committee by a vote of 7-1-1.                                                                        
Senator Al Adams cast the nay vote and Senator Randy                                                                            
Phillips was absent.